Getting All Hands on Deck

Last month, Richard Berner, director of the US Office of Financial Research (OFR), stated that the legal entity identifier (LEI) is an example of how public-private cooperation produces better standards. In the same week, the Global Legal Entity Identifier Foundation (GLEIF), the body that administers LEIs worldwide, launched a data challenge facility that allows interested parties to verify, and, when needed, update LEI records and their related reference data.

GLEIF’s action shows that it is listening to the methods Berner and his OFR colleagues are advocating, or at least using these methods of its own volition. Although the OFR has been supportive of GLEIF’s efforts, with its chief counsel serving as GLEIF’s first chairman, and continued participation in GLEIF’s executive committee, a paper by Berner’s colleague, Cornelius Crowley, chief data officer at the OFR, notes that LEI adoption is still uneven, more so in markets where the LEI is not required.

Worldwide 

For instance, from the 454,481 registered as of July 29, about 131,000 are from the US and Canada; about 154,000 are from the UK, France, Germany, Italy and Sweden; and about 12,000 are from Japan, Australia and Singapore. The other 156,000 or so LEIs are spread out worldwide in pockets of double- or single-digit numbers in numerous countries, some with 100 to 300 each, and a few others with several hundred each, namely Brazil, Russia, India and China. GLEIF CEO Stephan Wolf says the long-term goal of the foundation and the industry as a whole is 1.5 million LEI registrations, and he expects to reach that by 2020.

Crowley writes that the quality of existing LEI data is high, so while a data challenge facility designed to raise the quality of LEI data can’t hurt, GLEIF’s greatest concern has become industry and regulators’ trust in LEI registrations. 

GLEIF is figuring out how to work with the financial industry to increase trust in the accuracy of the LEIs being issued.

GLEIF’s verification effort can have value, if it promotes more frequent reporting for LEIs that isn’t dependent on annual renewal or new activity that requires renewal. This would go along with raising awareness that “lapsed” is not a correct description of LEIs that are dormant only because of a lack of activity involving the security, and are still accurate and correct, if not current.

Private Operations Efforts

Although GLEIF doesn’t require renewal of LEIs if a lot of time passes between activities involving the entity, entities must be registered for trades to be permitted in Europe, once Mifir takes effect in January 2018. “It needs to be done immediately or it will get to a point where someone is asked to do a trade and it can’t happen,” said Chris Johnson, head of project management for market data at HSBC Securities Services, in mid-May.

Firms’ use of multiple systems to organize LEI data can be an issue for managing registrations, as Lida Preyma, director, global AML compliance, BMO Capital Markets, and director, capital markets research, G20 Research Group, stated in June. “How many times is the same customer found in different systems? Is it even possible to integrate all these systems when there are silos?” she asked. 

Metadata could serve as the basis of better organization of LEI registrations and the resulting data, said Sydney Hassal, associate director, global capital markets banking, Scotiabank. “The primary issue with metadata is how much is needed to ensure the information you keep is usable for people—that they have access to it when they need it for a regulatory inquiry,” she said.

GLEIF, which by extension represents public interests, is figuring out how to work with the financial industry to increase trust in the accuracy of the LEIs being issued. That’s the prerequisite for getting the industry to promote and complete registrations, moving GLEIF closer to the goal of 1.5 million registrations by 2020. Also, ideas like harnessing metadata for LEIs and coordinating multiple systems for LEI accuracy, if developed and offered by private service providers, could also help reach that goal.